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Serving Asia's mass affluent

newsmaker The CEO of a Singapore-based software house Protege talks about understanding Asia's unique banking needs and surviving amid global pressures.
Written by Victoria Ho, Contributor

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newsmaker Kumaran Pillai knows a little something about global pressure. Faced with a financial recession in the early 2000s, the Singaporean entrepreneur was forced to shut down his dotcom business.

Shortly after in 2002, he started Protege Software, but it was only in 2004 that he decided to transform the business from a services company to a product firm, developing investment portfolio software for financial institutions.

The company recently won the enterprise-category of the global Itanium Solutions Award for this year.

Speaking to ZDNet Asia in an interview, Pillai talked about understanding Asia's unique banking needs, and finding a niche to survive amid global pressures on small Asian software houses.

ZDNet Asia: Is it difficult reaching out beyond Singapore's shores as an independent software vendor?
Pillai: Yes. In Singapore, we're facing competition from the entire spectrum. The government is encouraging foreign firms to set up shop here and compete, so I'm confronted with the big Western MNCs (multi-national corporations) and low cost innovators from other parts of Asia.

The only way to survive was to find a niche product, which we've done in portfolio optimization.

How different are you from the "low cost innovators" you talked about?
Well, we sell a specific point solution; banks usually have their core banking infrastructure installed, so we can't ask them to rip that out. By going in as a value-added provider and performing a single, critical function--in our case, wealth management--that's how we differentiate.

It's allowed us to get accounts that we couldn't have previously.

Niche also means we serve an area that is largely overlooked. Most of the wealth management systems which came out of Europe catered to very rich, high net worth individuals. In Asia, you're looking at new wealth that has been created after World War II.

Asia's wealth is the rise of the middle class--not super rich, but not exactly poor either. So banks in Asia will have different issues in servicing this mass affluent, but many don't have an efficient system, and that's where our niche is.

What challenges come with servicing the "mass affluent"?
Banks are all about the numbers game. It makes more sense servicing a rich client with a lot of money, because the fees off their large portfolios would be correspondingly large.

So it doesn't make a lot of business sense to service smaller clients for smaller revenues. That's why a lot of banks don't do proper justice to many portfolios belonging to the man on the street.

Proper justice means fact-finding to gauge your risk profile, and ongoing monitoring and rebalancing of those portfolios.

With proper software, we can crunch numbers on a whole set of voluminous data automatically, so that the fund manager doesn't have to spend half an hour to an hour rebalancing every individual account.

And if customers can get their portfolios rebalanced more regularly, then relationship managers can be alerted to provide more timely advice.

Can you replace the fund manager?
Yes. [laughs] A system can monitor and construct a portfolio for you, and even alert you to buy and sell. So why would you need a fund manager?

The investor needs to be educated on risk, though. And maybe the flip side is that we may lose the human touch.

But is it worth the trouble to learn new technology on both the bank's part and user's? Yes it is, if you're going to get 30 cents extra return on every dollar. And the technology won't cost 30 cents per dollar.

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